Sharp Surge in Short Selling Loan Balances... 4,000 Individuals Also Participate in Pre-Education

Short Selling Loan Balance Increases to 54 Trillion Won
Individual Investors Near 4,000 Participants in Education in Just Three Days

Financial Services Commission Chairman Eun Sung-soo is giving a speech at the meeting of financial investment-related organizations and securities company representatives held at the Korea Exchange in Yeouido, Seoul on the 15th. At this meeting, Chairman Eun reviewed the progress of follow-up measures on short selling and recent stock market trends. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Minji Lee] With the resumption of stock short selling just over a week away, the balance of securities lending has significantly increased, and individual investors are also preparing to participate in short selling by applying for mandatory pre-education.

According to the Korea Financial Investment Association on the 25th, the balance of securities lending transactions in the KOSPI and KOSDAQ markets was recorded at 54.0335 trillion KRW as of the 23rd. The balance of securities lending transactions had decreased from the 54 trillion KRW level in November last year to the 40 trillion KRW level earlier this year. This month, the balance showed a gradual increase, reaching 54.2931 trillion KRW on the 16th, recovering to the 54 trillion KRW level for the first time in five months. It is interpreted that the balance of securities lending transactions has significantly increased as institutions and foreigners are preparing the "ammunition" for short selling ahead of the resumption on the 3rd of next month.

Securities lending transactions involve lending stocks between institutions and foreigners for a fee and then returning the same stocks. In Korea, institutions and foreigners must first borrow stocks through securities lending transactions to conduct short selling. Although all lent stocks are not exclusively used for short selling, an increase in the balance of securities lending transactions can be seen as an increase in standby funds that could potentially be used for short selling.

Individual investors also appear to be actively entering the short selling market, supported by the financial authorities' measures to expand individual access to short selling. According to the Financial Investment Association, the mandatory 30-minute pre-education course for individual short selling, which individual investors must complete to newly participate in short selling, was opened on the 20th, and within four days, the number of participants reached 4,000. As of 2016, the number of individual accounts that conducted short selling transactions was approximately 6,400.

Meanwhile, ahead of the resumption of short selling, the Financial Services Commission has significantly revamped the individual securities lending system to make it easier for individual investors to participate in short selling. As of February last year, six securities firms provided securities lending services to individuals, with 393 stocks and 20.5 billion KRW available for lending. After the revamp, the number of securities firms increased to 28, and the lending target expanded to all stocks in the KOSPI 200 and KOSDAQ 150 indices, with a lending scale of 2.4 trillion KRW.

This content was produced with the assistance of AI translation services.